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tSEccsssrsiiD 

OBRARY on CONGRES'S^ 

F.A.C File No 


NOV 8-1956 


AUTHORIII^;/*^/*. /fAAieJ For. rW- 

n 

'PREPARED BY 

n 


CIVIL AFFAIRS DIVISION, SPECIAL STAFF 

,/S department of the ARM.Y ’ - 

1 JANUARY 1948 


y 

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THE NATIONAL WAR COLLEGE. 
WASHINGTON D. C. 


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CONIENTS 


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PARr I - POLITICAL AND SOCIAL DEVELOPMENTS 


POLITICAL AND SOCIAL DEVELOPMENTS. 1 

Austria*s Position and Historical Background •••••••••• 1 

Position of Military Government in Austria . • .. • 2 

Objectives of Occupation.... • . . . 3 

CONTROL. 4 

DEMILITARIZATION.-.. 5 

ESTABLISHMENT OF GOVERNMENT. 6 

The Provisional Government. , 6 

The 1945 Elections. 7 

The New Control Agreement. 7 

Political Activities and Parties. 7 

Relation of Military Government to Federal and Local Govern¬ 
ments . 7 

The Parties. 8 

Public Safety and Denazification. 10 

DEVELOPMENTS IN ras SOCIAL, FIELDS. 11 

Public Health . .. 11 

Displaced Persons and Repatriation. 12 

Education .. 14 

Ecclesiastical Affairs ........ . . 15 

Press^ Radioj Literature, Art . 16 


PART II - ECONOMIC PROBLEMS 


ECONOMIC PROBLEMS.,. 18 

Synopsis. 18 

Backgroiind of Austria’s Economic Problem .'. 22 

U.S. Economic Policy in Austria. 23 

Reparations, Deliveries and Restitutions ............ 23 

Manpower and Employment . ............. 25 

Mining Resources . 26 

Food and Agriculture . 27 

Food . .................. 27 

Livestock ..... . ........... 30 

Fuel and Power ..... . .............. 31 

Coal ........ . ............ 31 

Oil. 32 

Electric Power . . 33 

The Power Balance. 34 


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Transportation.....' . . • • % 

Manufacturing Industries •••••«••« . • . 35 

General.. . . . 35 

Iron and Steel . . .. 36 

Aluminum. 36 

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Leather.. .. 39 

Chemical Industries . • . • .. 40 

Foreign Trade and Balance of Payments. 41 

Finance.... 43 

Currency and Price Control . . ••....»• 44 

Reduction of Occupation Costs . .. 45 


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POLITICAL AND SOCIAL DEVELOPMENTS 

Austrians Position and Historical Background 

Austria, a comparatively small yet most important country, lies on the 
historical border line between eastern and western Europe* 

It has been a pillar of western civilization since the Middle Ages and 
any consideration of her problems should take ^account of her historical tradi¬ 
tions. For many centuries Austria had been the center of a powerful empire 
stretching far to the south.and east and conprising Slavic, Italian, Magyar and 
other people, all of which contributed in leaving their imprint on the Austrian 
character, which is thoroxaghly cosmopolitan. 

Today, the Austrian Republic is an outpost of the west whose trade 
with the East at present is very limited. Although her langaiage is German, 
Austria’s people have characteristics and traditions different from those of 
her once powerful neighbor. After the disintegration of the Austro-Hungarian 
Empire in 191B, Austria’s natural resources and her degree of self-sufficiency 
were greatly reduced and it became to a large extent economically dependent on 
Germany. These conditions prepared the ground for the expansionist ambitions 
of the Nazis. For several years Austria withstood the onslaughts of intrigue, 
persuasion and threats, but finally in 193B was integrated into Hitler’s Reich 
as the first victim of Nazi Gerraany. 

Austria, at the outbreak of lYorld War II, had ceased to exist as an 
entity. She had been reduced to a group of provinces of the Third Reich, her 
economy was submerged into the German war economy, her traditions, culture and 
characteristics were ruthlessly suppressed. Even her name was lost and an 
effort was made to Germanize the coimtry conpletely. 


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The most strenuous efforts of the new masters of Austria, hovfever, 
were imable to produce any great change in the characteristics of her people. 
Austrian character has a peculiar resiliency and an easy-going philosophy of 
life that refuses to take too serious a view of the material difficulties of 
existence. Despite the upheavals of the war years, she has slipped back into 
her previous mental outlook which combines an easy-going nonchalance, skilled 
workmanship, artistic brilliance, fertile inventiveness and a positive genius 
for jnaking the best of an extremely bad situation. 

Austrians consider themselves an integral part of western civilization 
and think of Vienna as one of its foremost cultural centers. The present 
Austrian Government is based on democratic principles, as was her first Republican 

i 

Government — formed after the collapse of the Austro-Hungarian Entire after 
World War I. 

Position of Military Government in Austria 

The Military Government in Austria occupies a position different from 
that in the occupied areas of Germany, Japan and Korea. 'Austria has an elected, 
constituted and recognized government which, although not enjoying the full 
rights of a sovereign state, nevertheless maintains and assumes the functions 
and responsibilities of any normal government. These responsibilities were^'con- 
firnBd under the terms of the New Control Agreement of 26 June 1946, and only in 
a few instances do governmental rights remain with the Allied ContDol Council or 
with the respective military commanders of the four Occupied Zones and the quadri¬ 
partite area or Vienna. 

The United States, in effect, acts in an advisory or supervisory 
capacity with respect to the Austrian Government; responsibilities for external 


RESTRICTED 





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negotiations with other nations, internal problems of political or economic 
natxire are to a very large extent the sole prerogative of that government* 
Objectives of Occupation 

1510 basic policy with reference to Austria was laid down by the 
United States, the ^Jnited Kingdom and the U.S*S,R* in the Moscow Declaration of 
1 November 1943> wherein Austria was recognized as “the first free country to fall 
a victim to Hitlerite aggression”* The three powers pledged themselves to her 
liberation and to the reestablishment of a “free and independent Austria” which 

would find “political and economic security.” These statements, however, were 

/ 

qualified by a reminder of Austria’s responsibilities for participation in the 
war at the side of Hitlerite Germany and warning was given that in the final 
settlement accoimt would be taken of Austrian contribution to her own liberation* 

•i 

France later became an adherent to the Moscow Declaration* 

United States policy has been based on a generous interpretation of 
the Moscow Declaration. The Commanding General of the IMited States Forces in 
Austria was directed to devote his efforts to t^he reestablishment of a free and 
independent Austrian State, freedom of speech and of the press, and a sound 
economy which could guarantee a fair standard of living for the Austrian people. 
Intensive studies of the physical, economic and political aspects of the country 
were made during the period of U*S* occupation and the data coUected were used 
to develop a comprehensive plan of rehabilitation* 

The initial objectives considered of vital in^ortance in carrying out 
U.S. policy in Austria were discontinuance of political and economic dependency 
from Germany, and purging of the Nazi element, both in private and public life* 


- 3 - 

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COHTOOL 

Until the establishment of the sillied Commission in Vienna in 
September 1945^ no unified control existed in Austria. The Allied Commission 
assumed supreme authority within the country and its decisions were based on a 
unanimous vote by the four High Commissioners constituting the iUJ.ied Council, 
each of whom was the Commanding General of one of the foxir Allied armies. 

Tlie Allied High Commissioners were assisted by a staff of experts to 
cope with the various problems arising from quadripartite occupation. Directo¬ 
rates consisting of Military Government Chiefs of Divisions were organized to 
resolve specialized problems — political, legal, economic and others. These 
Directorates in turn were assisted by working committees in the more technical 
fields. All decisions or recommendations of the Directorates were reported to 
the Executive Committee; composed of the four Allied Deputy Commissioners, and 
thence to the Allied Council. Ihey became effective by unanimous agreement in 
the Allied Council. 

The United States Element of the Allied Commission (USACA), is a 
special staff section of the Commanding General and under the direction of the 
United States Deputy Commissioner. IMs group recommends policy and action and 
is responsible for implementation of the decisions of the Allied Council within 
U.S. controlled territory. 

The United States Zone of Austria comprises Land Salzburg and Land 
l^per Austria with the exception of that portion lying north of the Danube towards 
the Czechoslovakian border. The Military Government of the Zone is responsible 
for the development and maintenance of the policies as transmitted from USACA. 

Each of the Allied Powers in Vienna has an area within the city, with 


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the inner city (first district) designated as an International Zone, A quadri¬ 
partite Korniuandatura, composed of the Vienna Area Goinraanders^ represents the 
supreme control authority of Vienna, 'fhe chairinanship rotates monthly and the 
Area Commander designated as chairman also supervises control in the Inter- 
national Zone. Decisions of the Kommandatura are implemented by the Military 
Government of each element. If controversial issues c^annot be agreed upon by 
the quadripartite Aoramandatura, they are submitted to the Allied Council for a 
decision. 

The new Control Agreement of June 1946 between the Occupying Powers 
and Austria returned to the Austrian Government a greater degree of sovereignty 
in the political and economic atffairs of its country. Accordingly the functions 

of the United States control organizations developed increasingly towards an 

1 

advisory position. 

DEMILITARIZATION 

\ 

The problem of demilitarization was of immediate concern to the United 
States Forces in Austria. The purely military phase which included the dis¬ 
arming of the German and Hungarian armies, and the destruction of war materials, 
proceeded in a routine manner. More complex problems were involved in the 
handling of material, especially industrial equipment, which had belonged to 
the German arqied forces, the Nazi State or to private individuals and which 
might be used effectively in a peace-time economy. Perishable material and 
clothing were issued to supply and equip displaced persons or turned over to the 
Austrian government. Machinery and machine tools were collected, inventoried and 
were authorized for use (without release of U.S. title) by Austrian industries 
where most needed. All war industries and experimental laboratories engaged in 


- 5 - 

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RESTRICTED 


war work were checked and some of them dismantled. Practically everything 
convertible to peace-time-use was turned back to the Austrians and the task 
of demilitarization within the U.o. Zone is considered completed. 

EST/iBLISHIvIENT OF GQVERI'JMENT 

Tlie Provisional Government 

^Vhen the Russians fought their way into Vienna in April of 1945^ the 
Austrians had organized anti-Nazi resistance units which were operating in Vienna 
Followers of all the old political parties. Conservatives (now the Peoples Party) 
Socialists and Communists, at that time cooperated in a most active manner in 
the liberation of the Austrian capital. 

Faced with the necessity of establishing a government, the Russians 
chose Dr. I^arl Renner, an old member of the Socialist Party who had previously 
been active in Austria's government, as Chancellor of a Provisionail Government. 
His government consisted of twelve ministers, five of them of the Peoples Party, 
four Socialists and three Communists. Because two of the key ministries of this 
government were held by Communists, who in the country as a whole constituted a 
very small minority, the apparent unbalance caused the U.S. Element at the be¬ 
ginning to doubt the sincerity of purpose of the government. Dr. Renner, how¬ 
ever, followed a politically independent line and, after the arrival of American 
troops in July of 1945^ showed clearly that his government was completely neutral 
with regard to the conflicting interests of the occupying pov/ers. Dr. Renner's 
statesmanship and experience and strong support by the Peoples and Socialist 
Parties succeeded in bringing the government through the critical period of 1945. 

The provisional government was so constituted that no action could be 
taken without unanimous consent of the I^linisters. V/ithin each ministry no 


- 6 - 

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important decision could be rendered v/ithout agreement by the Minister and his 
two Under Secretaries^ who always had to be of party affiliations different from 
that of the Minister. 

The 1945 Elections 

For a time travel restrictions and lack of communications presented 
many obr,.uacles to the smooth functioning of central control by the provisional 
government. These difficulties were relieved by the meeting of the representa¬ 
tives of all provinces in Vienna, who also laid the foundation for the calling 
of national elections under the reestablished constitution of 1929. The elections 
were held in a fair and orderly manner on 25 November 1945 without interference 
by the occupying powers, and in December 1945 the provisional government was 
succeeded by a new Federal government. 

The New Control Agreement 

The new Control Agreement, signed by the occupying powers on 28 June 
1946 , was the most important step in the achievement of United States policy 
objectives in Austria. It put into effect previous declarations made with re¬ 
gard to Austria and formally restored all sovereign rights to the Austrian 
government subject only to exceptions in certain matters of direct concern to 
the Allied Powers. The Austrian Government was authorized to pass laws and 
ordinances which became effective within a period of 31 days unless unanimously 
vetoed by the Allied Council. Activities of the United States Element now changed 
over from the phase of active control to that of supervision and advice. 

Political Activities and Parties 

Relation of Military Government to Federal and Local Governments . 

During the first six months of occupation there were no official relations between 


- 7 - 

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the United States Forces and the Austrian Provisional Government, but after the 
organization of the newly elected Federal Governuent close contacts were 


established. USAGA worked closely v/ith the Austrian Government authorities; 
exercised supervision over the various iiiinistries and advised them on their 
problems. 


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Military Government authorities in the U.S. Zone assisted the Land and 
municipal governnients in their operations. Because of the disruption of communi¬ 
cation and transportation facilities and the generally unsettled conditions pre- 
/ 

vailing in 1945 and early 1946, considerable time was required for the authority 
of the newly elected Federal Government to becom fully effective in the Austrian 
provinces. During this period of transition the United States Element exerted 
its influence in facilitating full cooperation between the provincial govern¬ 
ments and Federal authorities. i/Hlitary government in the Zone also acted as a 
liaison office in bringing to the attention of the United States Element of the 
Allied Commission complaints of the provincial authorities which were then re¬ 
ferred to the Federal authorities. 

•The Parties . Austrians traditionally have been politically conscious 
and jealous of the individual's right under constitutional government. In the 
rural areas, particularly, they are devoutly Catholic and anti-Marxist, In the 
national elections of 25 Naven±>er 1945 nearly 3^200,000 valid votes were cast, 
of which the Peoples Party received 49.BSS, the Socialists 46^> while the Commu¬ 
nists polled but 5.42^. Ttie low vote of the Communist Party was remarkable in 
the light of the bitter and aggressive campaign carried on in the pre-election 
period. It was due to many factors; the behavior of the Russians in eastern 
Austria, and the systematic removals of machinery and equipment, and other 


- 8 - 

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property seizures.had combined to produce a defensive attitude towards the 
Russians. 

t V. 

As a result of the Noveiaber 1945 elections, 85 parliamentary seats 
vfent to the Peoples Party, 76 to the Socialists and 4 to the Communists. 

The Peoples Party is the party of ]:)easants, small businessmen and 
tradesmen. It includes many forn^er adhel:ents of the party of the same name 
of the pre-Anschluss period, as well as many former Christian Socialists and 
Catholics. It believes in free enterprise, opposes excessive governmental 
controls and follows, ideologically,- a philosophy of religious conservatism. 

The Socialist Party, which is the party of workers, contains a portion 
of the lower middle class and of the Austrian intelligensia. Ably led and im¬ 
placably anti-Communist, the Socialists are a tightly organized party and far 
from radical in character. They advocate nationalization of the key industries 
but would leave large portions of the Austrian economy to operate without 
restrictions. 

The Communist Party follows a Soviet-directed line, but has, for 
reasons of opportunism, developed a special brand of Communism adapted to 
Austrian conditions v;hich dares not go so far as to advocate collectivization 
of the farms-nor interference \7±th the small shopkeeper or businessman. Ihe 
Party’s present leaders came from Moscow where most had fled after the emergence 
of National Socialism. Their tactics are directed against the west, particularly 
Afrerica; their propaganda calls for cooperation with the Soviets. 

The government of Austria is a coalition government. As a result most 
of the measures promulgated have failed to satisfy completely either of the 
majority parties, but in nearly all cases workable compromises have been achieved 


- 9 - 

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The present governriient has consistently opposed Russian encroachiuent. It has 
refused to give clear title to Russian-seized enterprises or to be tempted by 
spurious partnership propositions* It has consistently worked for the economic 
unity of Austria, has opposed Russian transgressions and policies with regard to 
the seized German assets and has arduously demanded the return of Austrian 
prisoners of war. It has shov/n willingness to trade with countries of the 
Eastern Bloc, but trade with free currency countries has been favored. Generally 
the record of the government is one of firm opposition to Russian pressure but 
without hostility to Russia. 

The present government was elected in November 1945 Tor a term of four 

T 

years. The Constitution gives the President of the Republic power to dissolve 
Parliament before that time, and there is some Communistic agitation for such a 
move. In view of the comparative popularity of the present government, which 
gives a fair representation to the various political groups, it does not appear 
likely that such action will be taken. 

Public Safety and Denazification 

One of the fir st problems of the United States Forces was the re¬ 
establishing of an Austrian police force in the U.S. Zone. Nazis were removed 
and replaced by dependable individuals. The police force was uniformed and 
equipped to a limited degree, and excellent cooperation was established between 
the United States is^Iilitary Police and the Austrian police. 

In Vienna the problem was complicated by quadripartite control and by 
the establishment, by the Soviet Element, of a political police which was almost 
entirely Comrfainistic. 

Denazification proceedings were closely associated with the police 


- 10 - 

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problem, .^1 Nazis who were in arrestable categories were taken into custody 
by .American Security Troops, with the cooperation of the reconstituted Austrian 
police, and placed in detention camps. The Austrian Parliament passed denazi¬ 
fication legislation and reported regularly on the purging of Nazis from govern¬ 
ment payrolls. The problem in private>industry is extremely^ complicated. In the 
American Zone the United States Element has insisted that Nazi party members be 
dismissed from any position of responsibility. j\fter much urging the Austrian 
Government produced a draft of law defining the character of industrial activity 
and the type of responsibility which should be closed to former Nazi party 
members. This law was unacceptable to the /illied Powers and no further action 
has been taken since, 

DEVELOPl/ENTS IN THE SOCIiil FIELDS 

Public Health 

Protection of the health of United States troops, as well as of the 
population of occupied territories, became an urgent problem after VE Day. 

Local health authorities were assisted in checking the spread of contagious 

disease and, in case of need, were supplied with drugs and hospital equipment. 

\ 

The United States Element, by the end of 1946, had furnished to the 
Austrian Government 17 75 tons of medical supplies and had assisted in the 
distribution of these supplies to the population. The stocks consisted of 
captured enemy medical supplies as well as imported !iLlitary Government medical 
' stocks. Twenty-four complete former German Army hospitals, with an average of 
300 beds each, were turned over to the Austrians, and 27 ambulances were’ delivered 

A total of 484 kilograms of captured raw narcotics was released to the 

I 

- 11 - 

RESTRICTED 


to Vienna. 





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Austrian Government and assistance was given in establishing a laboratory for 
processing these products for medicinal use. A poor nutritional situation had 
lowered resistance to disease. In Vienna and the cities of lower Austria, con¬ 
ditions were particularly dangerous. Active U.S. assistance, combined with the 
establishment of a control system for typhus and venereal diseases, was largely 
responsible for the fact that no outbreeik of any of these diseases has assumed 
epidemic proportions. iVhile typhus and other diseases appeared sporadic ally , 
the spreading of these diseases was brought immediately under control with the 
assistance of United States authorities. 

Displaced Persons and Repatriation 

The United States Zone in Austria, to a greater extent than any other 

I 

zone, was faced with the problem of handling a large influx of displaced persons. 

In the course of some 18 months more than 950,000 passed into or through the zone 
and at times nearly a half million of these people were superimposed on the normal 
population of about 1,250,000. Among those displaced persons were individuals of 
Zf8 nationalities, former inmates of concentration and slave labor camps, discharged 
German Anny personnel and refugees, including many Austrians who had fled from 
the advancing Russian armies. Since the end of hostilities, the problem in the 
U.S. Zone has been further aggravated by the infiltration of large numbers of 
additional refugees from areas under Soviet domination, principally Hungarians, 
XSermanic minorities formerly residing in the Danubian states, and Jews from Poland, 
Hungary and Rumania. 

Adhering strictly to the U.S. policies established for the treatment of 
displaced persons, the Commanding General of USFA segregated by nationality as far 
as practicable and gave preferential status to persons of neutral or allied 


- 12 - 

RESTRICTED 







RESTRICTED 


nationality; ex-enemy nationals were given equal treatment with the Austrians, 
Extraordinary efforts were made to rehabilitate persons victimized by Nazi 
persecution for reasons of race, religion or political beliefs. The United 
States policy from the beginning provided that no displaced person of any 
nationality would be returned to his country against his will except as a war 
criminal• 

A tremendous repatriation program was carried out. Since JAay 1945^ 

757f000 displaced persons returned to their countries of origin or resettled 
in other territories, more than 80% of them with active assistance of U.S.** 
military authorities. The Army also helped in the transfer of more than 25C,000 
persons between Hungary and Germany, It assumed the burden for the care of the 
displaced persons as long as they remained in Austria, organizing the supply of 
food, housing, medical care and clothing, and directing the welfare work of 
Ul'IRRA and other voluntary relief agencies. 

More than 160,000 displaced persons remained in the U.S, Zone of 
Austria, including 15,000 Jewish refugees recently arrived from Rumania. Some 

of these people may still desire repatriation. The resettlement of others in 

/ 

western Europe, South America, or elsewhere will be slow and costly. Since it 
has long beeb evident that a considerable number of displaced persons will re¬ 
main in the U.S. Zone for many years, strenuous efforts were made to reduce the 
administrative burden carried by both the U.S. Army and the Austrian Government. 
The displaced persons were required to become self-supporting to the maximum 
possible extent, pending their eventual repatriation or resettlement outside of 


- 13 - 

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Education 

I 

In the early days of occupation the schools and universities were 

closed, A large number of the teaching staffs had left Austria years ago for 

\ 

other countries to avoid Nazi persecution, many were inmates of concentration 
camps, and school buildings were used by troops or as olpces of refuge by dis¬ 
placed persons. 

Austrian civilian authorities took steps to effect the return of some 
instructors, subjected others to a careful screening process, removed objection¬ 
able material from textbooks and other school media and revised curricula and 
courses of study. The U.E.^Military Government authorities gave their fullest 
assistance and cooperation in this undertaking. 

With the beginning of the school year in September 1945> most of the 
school buildings again were available for use; some repairs had been made and 
facilities were provided for approximately 85% of all children of elementary 
shhool age, and 70% of those of secondary school age. 

High schools and universities reopened to a limited extent but with 
greatly reduced staffs, depleted and disorganized facilities, and severely 
damaged buildings. 

In 1946 and 1947 attendance in elementary schools was back to normal, 
and conditions in the secondary schools also showed further improvement. Adult 
education increased and universities recorded the highest enrollment in ten years 

The continued shortage of teachers, books and supplies was partially 
overcome by short sessions, double shifts and large classes. Teacher training 
institutions operated at full capacity and with increased enrollments. 

Action by the Military Government was generally limited to emergency 

- 14 - 

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assistance, ' More than 300 textbooks were examined by educational experts of 
the occupying powers and more than 200 of these were approved. Hundreds of • 
tons of book paper, linen backing board and other materials were procured. 
Textbooks and manuals formerly used in the U,S, Army Information and Education 
Program were turned over to the Austrian l-tLnistry of Educa'tion for use at all 
levels of Austrians schools, U,S, authorities succeeded in locating some 500 
tons of evacuated technical apparatus, scientific and research equipment and 
caused its return to Austrian universities. Educational films were examined; 
some were banned or revised, but the majority were approved. Scientific and 
technical journals were obtained from the American Library Association for use 
in the Austrian school system. 

As a result of ideological isolation under the Nazi regime, most 
Austrian educators have been out of touch with educational developments in 
other co\intries* Others have suffered from the war or have been eliminated by 
political considerations. Many former teachers have established citizenship in 
other countries. These factors illustrate some of the handicaps to complete 
rehabilitation of the Austrian educational system. 

Ecclesiastical Affairs 

V/hen the U,3, Forces entered Austria in early 1945, the Nazis had not 
only suppressed but actively persecuted clergymen and religious organizations 
and had ordered the closing of all places of public worship. Ecclesiastical and 
institutional properties with the exception of the church buildings were con¬ 
fiscated, and even these were stripped of bells and other materials which could 
be used in the Nazi war effort, 

U,S, Military Government has restored freedom of worship and religion 


- 15 - ^ 

RESTRICTED 





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to all Austrians, church properties were returned and restored, and attendance 
at services has greatly increased. The churches are attempting to resume their 
charitable, social, cultural and educational programs. Repairs are being made 
to properties as fast as materials become available. 

Churches are contributing to the denazification process by appropriate 
sermons, lectures, newspapers and pamphlets. With poverty, hunger, cold and 
errployraent at mere subsistence levels abounding, the churches face great diffi¬ 
culties in preventing the civilian population from becoming an easy prey to all 
sorts of demagogic attempts. They perform a significant service in keeping up 
popular morale during the present period of material hardship, by emphasizing 
the resources derived from spiritual values. 

Press. Radio> Literature, Art 

The U.S. Forces in Austria were accompanied by representatives of the 
Information Services Branch. Their first move was to shut down all publishing 
activities in the U.S. Zone of Austria. Then began the task of rebuilding the 
press, radio and theater along lines conforming to western democratic conceptions. 

The Austrian press in general is a party press, though in the Western 
Zones there are a few newspapers without party affiliations. 

The U.S. authorities established and continues to support daily 
publications of their own in Innsbruck, Salzburg, Linz and Vienna, The most 
important of these is the "Wiener Kurier," with a daily circulation of 30b,000. 

The U.S. Forces established and supervises radio network which is 
recognized by the public for its straightforward presentation of the news. 

In the important field of ideological reorientation, the United States 

I 

Element has accomplished much in presenting the story of American democracy to 


- 16 - 

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the public. Reference and lending libraries have been established, and hundreds 
of volumes of American literatiire and the latest issues of more than one hundred 
U.S. magazines and journals are thus made available to the Austrian public. 

The U*3. authorities have greatly contributed to the rehabilitation 
of Austrian cultural activities by supplying pertinent literature on world de¬ 
velopments during the seven years of A\istrian isolation. They also returned 
many million dollars worth of art treasures belonging to Austrian institutions 
but held in concealment in Germany. 


- 17 - 

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\ 

ECONOMIC PRQBmiS OF AUSTRIA 


Synopsis 

Austria*s basic economic needs are food for her people and fuel and 
raw materials for her factories. Since a portion of these needs must be im¬ 
ported, Austria must sell goods and services to other countries in order to 
achieve a balanced economy. 

Even in the best crop years, Austria has not been able to produce 
more than 75^ of her food requirements. During the years of German occupation 
and war, agriculture suffered from arbitrary crop regulations set up in the 
interest of the German Reich rather than of Austria, and the lack of supplies, 
equipment and manpower which developed then has continued, with the result that 
the country is at present unable to produce more than about half of its required 
food supply. Agricultural rehabilitation is a slow process which will take at 
least three to five years and will require large quantities of fertilizer and 
machinery. There is also room for improvement and modernization of farming 
methods. 


Austria normally can produce almost all of her brown coal requirements, 
but more than 90% of the industrially important hard coal must be imported. Since 
hard coal is essential, either as fuel or as raw material to nearly ail of 
Austria*s industries, this is the coimtry*s basic industrial import need. 

Manufacturing industries, which produce a major share of Austria’s 
exportable goods, must import raw materials and semi-finished goods for pro¬ 
cessing. This is especially true in the important textile field, vriiere require¬ 
ments include cotton, wool, hen^) and other raw materials, as well as yarn and 
semi-finished cloth to be turned into finished products. The metal-working 


- 18 - 

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industries need zinc, copper, lead and various alloy materials, and certain 
types of machinery must also be imported. Austria normally produces most of 
her own railroad rolling stock, but at the present time imports are needed to 
overcome shortages caused by destruction coupled with meager replacements. 

To balance these and other import needs, Austria is potentially 
capable of exporting a variety of items urgently needed by other countries. 

The dislocaticfns of war have crippled her capacity to produce these items, and 
the proposals for aid to Austria under the European Recovery Program aim: pri¬ 
marily at the restoration and development of her productive facilities. A 
balanced economy — and ultimate termination of the need for aid — depends on 
bxiilding up exports to a point where they will pay for imports. 

The principal natural resource providing a basis for Austrian exports 
lies in her forests. V/ood and paper products in a great variety of finished and 
semi-finished forms constituted, before the war, 23^ of Austria*s exports by 
value; but their importance is even greater b;ecause the raw materials are ob¬ 
tained within the country. Today, Austria*s forests are threatened. Serious 
overcutting during the years of German occupation have depleted reserves, and 
corrective measures must be taken by decreasing cutting and increasing re-- 
forestation programs to restore a normal balance. Exportable surpluses of 
other natural resoiorces are limited. In normal times, Austrian mines can support 
some exports of iron ore, magnesite, graphite and salt. 

Oil was discovered near Vienna in recent times but was not developed 
intensively until Austria became part of the German Reich in 1933. Since the 
war, large quantities of Austrian oil have been shipped to Eastern Europe. Up 
to the present, the Austrian economy has not benefited from such exports because 


- 19 - 

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Soviet occupation authorities have retained control pending a settlement of the 
Geriuan external assets question. 

Electric energy obtainable by harnessing the large potential water 
power in Austria*s western mountain areas represents another potential export 
item. Even at the present stage of hydro-electric development, surpluses of 
power are already available. 

Before the war, revenues from Austria*s large tourist trade and from 
transit freight and handling charges were impprtant sources of foreign exchange. 

It is expected that this important aid in achieving a balance of payments will 
again be available with the return to more normal conditions. 

Other Austrian export items are dependent for their production on im¬ 
portation of raw materials or semi-finished goods. Items expected to be important 

/ 

in this class of exports are metallurgical and paper products, textiles and 
leather goods. Increasing exports will also be derived from the recently ae- 
veloped chemical industries. 

Thus far the supply of raw materials and semi-finished products re¬ 
quired by most manufacturing industries for processing has been entirely in- 
sufficient to enable these industries to produce sufficient quantities for 
domestic consumption and exports, therefore, are at a small fraction of prewar 
levels. 

Conversion and adjustment of Austria*s industrial plant to postwar 
conditions presents serious problems. Most of the machinery is of German manu¬ 
facture and of comparatively recent origin, with years of productive use re¬ 
maining. Purchase of replacement parts, however, is difficult because of 
existing regulations in the German Bizonal Area — the center of German machine 


- 20 - 

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AUSTRIA 


POPULATION DENSITY OF ZONES 
& COMPARISON OF AUSTRIA & U.S^. 


3300 


250 

200 

150 

100 

50 



U.S. 

AUSTRIA 

U.S. U.K. 

USSR FRENCH 

1940 

1947 

-AUSTRIAN 

ZONES-' 


VIENNA 


The largest densities appear in th- J.S.S.R. and U.S, Zones, Tfith 
lesser population per square mile in th« more rugged sections of the country 
in the British and particularly the French Zone. 

The large population concentrated in the city of Vienna raises the 
average density for Austria to a level higl'ier than that of any of the zones. 

Austria has five times as many people per square mile but only about 


half as many as 

Potsdam Germany, 





For Austria as a vthole, no significart population changes have occurred 
during the last fifteen years. Regionally however the changes, were con¬ 
siderable, as shown by the following table: 




POPULATION 





PREVy.iR 

MID PRESENT 





1224 

1242 

Increase Decrease 



U.S. Zone 

947,729 

-.,297,700 

37^ 



U.K, Zone 

1,441,270 

;'.,670,325 

16^ 



U.S.S.R. Zone 

1,957,231 

'.,962,266 




French Zone 

473,331 

386,210 

2h% 



Vienna 

.l-i225a9it^ 

1^4x283- 

- 1956 



Total Austria 

6.755.507 

. 2:. j21x.g8i. 

IS 













































































RESTRICTED 


industry — forbidding barter transactions and permitting exports only in 
return for dollar payments. 

Under provisions of the Potsdam Agreement "Appropriate German 
External Assets" in Austria may be applied against reparation claims. The 
IfVestern Powers consider only bona fide pre-193^ German ownership as German 
assets, And assimie that post-Anschluss German ownership is subject to scrutiny 
and that in many such cases a legal claim may be established by Austrians or 
others. The Soviets, on the other hand, claim that German ownership, whenever 
or however acquired, is definite proof that the property is a German asset and 
they dispose of such property accordingly. 

In spite of many handicaps it is expected that, with initial external 
aid, Austrian production will eventually reach a level permitting sufficient 
exports to restore a balanced economy. 

^ Austria began to reestablish foreign trade by means of barter trans¬ 
actions with several European nations, and normal trading on a limited scale 
was later established with severfil European countries where trade could be 
based on an exchange of the respective currencies. 

The estimated balance of payment for 1947 shows a considerable deficit. 
In the immediate post-war period, outside aid to Austria had to take care of the 
most pressing needs, such as food, and thus was in the character of relief rather 
than rehabilitation. Long-term rehabilitation supplies, which are indispensable 
for a sound economic recovery, are expected to become available under the ERP, 
Austria’s financial structure was precarious when the Allies arrived 
in Austria, There is considerable uncertainty as to the. ultimate fate of some 
of her inportant banking and insurance institutions because of the Soviet claims 


- 21 - 

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to certain German external assets. Inflationary pressure still exists^ but 
the country has made great strides in reducing the amount of currency in circu¬ 
lation and in maintaining control over the upward movement of prices and wages* 

The most desirable development for the rehabilitation of the country’s 
economy would be an early peace treaty, but even under those conditions, Austria 
will continue to need outside help for several years .to rebuild and maintain 
her econoioy on a sound basis. 

Background of Austria’s Economic Problem 

r 

For the second time in a generation Austria faces major problems of 
economic readjustment. The first V/orld War had spared the country from the 
ravages of war but Austria, which had been the heart of the larger Austro- 
Hungarian Empire, became a small nation, deficient in food and raw materials. 

At the end of World War II the eastern section of the country, agri¬ 
culturally and industrially the most important part, was devastated and despoiled 
and the retreating Germans left it in complete chaos behind them. Railroads had 
all but ceased to operate, cities and factories were smashed by bombing, the 
remaining crops were diminished by unfavorable weather and lack of manpower, and 
food and other surpluses had vanished. Hundreds of thousands of displaced persons 
were roaming the countryside, looting and plundering. 

Despite these conditions there were some compensatory aspects. In 
spite of war damage and subsequent heavy removals of capital goods by the Soviets, 
Austria’s latent industrial capacity remained at a comparatively high level, 
largely because of industrial expansion initiated by the Germans in 193S for 
their own purposes. 

The oil fields near Vienna were rapidly developed during the war and 


- 22 - 

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if the Austrians can regain control over their output, they will have the benefit 
of natural resources by am important new raw material, were it not for the 
diversion of a major portion* of the output to eastern Europe by the Soviet 
authorities. 

In order for Austria to achieve economic recovery she must reestablish 
her foreign credits amd trade. Exports are the vital thread on which a country*s 

■A, 

life depends'when it cannot attain self-sufficiency in food supplies and is 
forced to import many of the raw materials for her finishing industries. 

U.S. Economic Policy in Austria 

U.S. policy is based on the ?!bscow Declaration which designates Austria 
as a victim of Hitlerite aggression rather than as an enemy country. Its aims 
are to-assist Austria in her struggle to achieve a balanced economy which will 
insure an adequate standard of living. U.S. troops and nationals have not been 
allowed to use Austrian products and food or to purchase critical or rationed 
items. 

Reparations. Deliveries and Restitutions 

Before the occupation of Austria it was recognized that control and 
protective measiires over certain classes of properties would have to be es¬ 
tablished in order to insure proper preservation and operation pending final 
disposition of such properties in accordance with policies agreed on by the four 
occupying powers. All properties in the U.S. Zone of Austria, owned directly or 
indirectly by German interests or nationals, were to be subject to reparation 
agreements among the occupying powers. 

In the U.S. Zone, properties belonging to members of the United Nations 
and expropriated properties of victims of Nazi persecution were segregated and 

- 23 - 

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taken into custody pending their restoration to the owner or his authorized 
agents • 

✓ 

* 

Among the German assets placed under U.S. control were numerous large 
plants, which are of paramount importance to the Austrian economy. Rather than 
let them remadn idle, the U.S. Element, in July 1946, concluded the so-called 
“Trusteeship Agreement” with Austria. This permitted the Austrian Government to 

operate allegedly German-owned industrial and commercial properties, pending 

/ 

final disposition of the problem of German capital assets. The Austrian Govern¬ 
ment as trustee is accountable to the U.S. Forces in Axistria for the proper use 
and maintenance of these properties. Moreover, coordination with the other 
western occupation powers has made possible interzonal movement of German-owned 
machinery and the Austrian Government may distribute and allocate such machinery 
to meet economic requirements. 

Real and movable properties, title to which is claimed by any United 
Nations national or by a victim of Nazi persecution, are returned as claims are 
proved. This involves many removals of machinery broxight to Austria from some 
other country by the Nazis and since used in production of vital goods,' and has 
a disturbing effect on the progress of Austria’s economic rehabilitation. 

Enormous quantities of stolen or unidentifiable movable properties were collected 
and warehoused. yfMch looted property has been returned to the proper owners and 
more claims are still being received. 

The Soviet interpretation of the terms of the Potsdam and London 
Declarations relating to reparations and restitutions has differed from that of 
the Western Allies. Property to which a German national held title, prior to 
August 1945, is considered by the Soviets as bona fide German property and. 


- 24 - 

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jtdik 











COMPARATIVE DISTRIBUTION OF LAND AREAS BY ZONES 


AUSTRIA 


ARABLE LAND 
3 % 


VIENNA 

470 



USSR ZONE 
9,300 Sq. Miles 


U.K. ZONE 
10,600 Sq. Miles 


Austria was divided into zones of occupation by agreement of the 
European Advisory Commission in July 1945* The zones vary considerably 
in area, population and economic resources. 

60% of the area of the Soviet Zone consists of arable and other 
agricultural land. This compares with only 17% agriculturally productive 
land for the French Zone, which includes much mountainous territory with 
large areas of alpine meadows and unproductive land. The American and the 
British Zones range somewhere in between. A high percentage of forest 
areas is characteristic for all zones and explains the important role 
wood and wood products play in the Austrian economy. 




















































































































RESTRICTED 


therefore, subjeet to reparation claims. No attempts are made to investigate 
the possibility of claims on such properties by owners who held them prior to 
the Nazi invasion of Austria in 193^^ and may have transferred them to German 
nationals under duress. 

In consequence, a number of industrial installations in the Soviet 
Zone, notably the valuable Zistersdorf oilfields and cable and electrical 
equipment plants, have been seized and their production diverted from the 
Austrian economy. 

The Austrian Government has adopted a stiff defensive attitude, re¬ 
fusing to sanction or recognize transfer of German assets to Soviet ownership 
until it is proved that the properties were German-owned before the Nazi occu¬ 
pation. This issue has created a deadlock in quadripartite negotiations. The 
Austrian point of view has had the full support of the United States and the 
United Kingdom, and partial support of France* 

Manpower and Employment 

In the initial stages of occupation the labor situation was very 
serious. Hundreds of thousands of workers in the most productive age classes 
were in the array. They had been replaced by women, prisoners of war, foreign 
and forced, labor. As soon as Allied troops entered Austria these people 
abandoned their tools and left their enqployment. 

Slowly order was restored. Displaced persons who remained sought 
employnent, and returning Austrian prisoners of war began to resume their former 
occupations. The accompanying chart illustrates the development of post-war 
employment. The acute fuel and power crisis of the winter months of 1946-47 
caused a temporary drop in enq^loyment figures, but by the end of June the number 


RESTRICTED 





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'■'ii.c;y;^.,{ioiiii 
















AUSTRIA 


GAINFULLY OCCUPIED 


AGRICULTURE 



AGRICULTURE 


INDUSTRY 
& TRADE 


COMMERCE 

&TRANSP 1 


INDUSTRY 
A TRADE 


PUBLIC & 
PRIVATE 
SERVICE 2.9% 

DOMESTIC 
SERVICES 1% 



1934 

2,083,000 PERSONS— 
31% OF POPULATION 


DOMESTIC 
SERVICES 1.2% 

194/ 

2,595,000 PERSONS— 
37.5% OF POPULATION 


OMMERCE 
■& TRANSP 

PUBLIC & 
PRIVATE 
SERVICE 4% 





PERSONS QUALIFIED FOR HEALTH INSURANCE 

(SELF EMPLOYED ARE EXCLUDED) 



1946 


1947 



The number of gainfTilly occupied persons has increased about 20 ^ over 
1937 levels and the trend is still upward. 

In spite of increased employment, both agricTiltural and industrial 
production figures are still much below prewar levels. This highlights 
Austria's low efficiency of production, caused by shortages of materials, 
inability to replace or maintain existing machinery and by low worker pro¬ 
ductivity due to insufficient feeding levels. 






















































RESTRICTED 


of employed was in excess of 1937^ and only slightly below the all-time prewar 
high reached in 1939. 

By the end of June 1947 there were 17,058 job seekers as compared with 
128,165 vacancies. It is evident that Austria is not faced with any unemploy¬ 
ment problems in the immediate future. 

Only in the category of white collar workers are there more job-seekers 
than vacancies. The greatest shortage of labor is in agriculture, but there is 
also an unceasing demand for skilled industrial workers. The fact that employ¬ 
ment figures are higher than in 1937, while actual industrial production is less 
than half of prewar production illustrates the great drop in labor productivity 
as a result of more than two years of consistent underfeeding of the working man 
and of a lack of skilled labor and properly maintained equipment. Increased 
rations and industrial training schools will help to eliminate this stumbling 
block to Austrian economic recovery. 

Mining Resources 

Though Austria is deficient in mining resources, there are some ores 
in wnich the country is self-suf f icient * and which play an important role in her 
economy. 

Foremost are the large iron ore deposits of the Erzberg in the British 
Zone, which are the basis for the Austrian iron and steel industry. Production 
in 1937 was 1,550,(X)0 tons, of which 450,CXX) tons were exported. Austrian pro¬ 
duction amounted to 460,000 tons in 1946 and rose to 330,000 tons for the first 
six months of 1947. 

Magnesite, another important e:}q)ort item, was mined at the rate of 
400,000 tons during the year of 1937, but production dropped to 95,000 tons in 


- 26 - 

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AUSTRIA 


PRODUCTION OF PRINCIPAL FOOD CROPS 
AND COMPARISON OF YIELDS 

BREAD GRAINS 

PRODUaiON IN 100,000 METRIC TONS 




YIELD IN BUSHELS PER ACRE 

(AVERAGE BARLEY, OATS, CORN) 



USA 


I ■ 07 A,* ■ ■ ' 

a a a a a ■ 




'91‘i 

194 ^ 


COARSE GRAINS 



PRODUCTION IN 100,000 METRIC TONS 
(BARLEY, OATS. CORN) 



YIELD IN BUSHELS PER ACRE 



POTATOES 


PRODUCTION IN MILLION METRIC TONS 



1938 1943 1946 


Production of principal agricultural c'' ^,s is less than half of pre¬ 
war volume• To some extent this is due * a reduction in acreage planted, 
caused by manpower and seed shortages *ne major portion of the decreased 
6utput is a direct result of a dr?' ^ally reduced yield, because of lack 
of fertilizer. 

Austrian agriculture nevoi had reached the high degree of scientific 
cultivation achieved in Germany before the war. Its prewar agricultural 
yields still compared favorably with corresponding U.S. figures. At the 
present time, however, Austrian y^eat and coarse grain yields are con¬ 
siderably below U.S. yields. 


















































































































il[$TIUCTEB 


1946 . Graphite production decreased from a prewar level of 18,000 tons to an 

/ 

insignificant volume in 1946. The British Zone, which contains all the iron 
ore, magnesite and most of the graphite, also has all of Austria’s lead, zinc 
and molybdenum ore mines. Some copper ore is mined in the United States Zone, 
but production is insufficient for Austria’s internal requirements. 

. Another important mining product is salt. More than 90^ of the known 
salt deposits are in the U.S. Zone, and Austria has an export surplus in this 
commodity. Except for salt, mining production has dropped greatly below the 
1937 level, because of removal or lack of maintenance of mining machinery, and 
insufficient availability of qualified miners and of mining supplies. An in¬ 
crease in production depends on the import of capital goods, mining equipment 
and supplies and on inqprovement of labor conditions. 

Food and Agriculture 

Food . Food is the basic necessity for the economic life of a country. 
Dismemberment of the Austro-Hungarian Empire after World War I meant the loss of 
vital food producing areas to Austrian econony and the necessity tb import nearly 
50 ^ of all food consumed; In the subsequent period of readjustment, Austria 
succeeded in reducing food iioports and in attaining self-sufficiency in dairy 
products and sugar beets. However, even in her best year, 1937> the country 
could not produce more than 75^ of total food requirements and had to cover the 
deficit by im|x>rts, mostly grains, from eastern European states. 

With the Nazi occupation, changes were forced on the agrlcviltiiral 
econony of the country, with es^ihasls being placed on the production of oil- 
bearing crops at the expense of grains. The general disorganization brought 
about by the war caused a further.acreage loss of arable land, and soil 

- 27 - 

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exhaustion, due to insufficient supplies of fertilizer, resulted in far lower 
yields per hectare than in prewar /ears. 

The combination of aill these factors produced the extremely critical 
food situation which has existed ever since the end of World War II. The city 
of Vienna was particularly vulnerable to shortages. In May, June, July and 
August 1945> immediately after the withdrawal of the German armies, lack of 
food was acute. The Soviet Army, iidiich was the only occupying power at that 
time, was not .prepared for the task of feeding the large population and by mid- 
July the normal consumer received only 800 calories daily of the lowest quality 
food, mainly potatoes, dried peas and beans. Some industrial areas in the 
Soviet Zone fared even worse with about 600 calories per day for periods of 
weeks. The situation was not improved \mtil September when the other Allied 
Powers moved into Vienna and provided additional foodstuffs, which brought the 
normal consumer ration to 1550 calories. 

The period 1 September 1945 to 1 April 1946 might be called the ”inili- 
tary phase'* of the Austrian food problem, with each of the four zones an isolated 
cell. The U.S. Army made a tremendous effort to give needed food and supplied a 
total of 240,000 tons of food, including 70,000 tons for the French Zone. Ihese 
additional supplies made it possible to provide 1550 daily calories for the 

normal non-self-supplying consumer in the U.S. Zone, 1000 calories in the French 

/ 

Zone, and 1200 to 1500 calories in the U.S. area of Vienna. The British also 
succeeded in maintaining a normal ration of 1550 caloried dally. No accurate 
information xs available for the Soviet Zone, but it is certain that the rations 
in the urban areas irare far below even the low standards provided by the other 
zones. As for the contribution from indigenous productioi, it can bo stated 

e 

that the 1945 harvest was the worst in the history of Austria. 

- 28 - 

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AUSTRIA 


DECLINE IN PER CAPITA FOOD 
CONSUMPTION AND PRODUCTION 


POPULATION 
6,760,23J 


POPULATION 

7.09T286 


AVERAGE CONSUMPTION 


2850 CALORIES 
PER PERSON 
PER DAY 




z 

o 


z 

o 

to 

< 

3 

o 


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3 

o 


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Ol 

Z 

o 


PREWAR (1937) 


1946-47 


Befor e Vforld War:;ll Austrian rood consumption was on a par with that 
of other Western European nations. In 1937 Austria covered three quarters 
of its consumption by indigenous production. During the Nazi regime 
Austria, was fitted into an over-all plan for greater Germany, and was 
forced to reduce its grain acreage in favor of other crops. The general 
disorganization of the Austrian economy after the war further aggravated 
the food problem and caused serious shortages. In certain sections of the 
country, pa rticularly Vienna, consumption for weeks went as low as 800 
calories per person per day. Indigenous production was supplemented only 
by cohtributions from UNRRA and from U,S, Army stocks. The 1660 calorie 
ration for 1936-47 was an average of the various graduations in the ration 
scale, ranging from 1200 for small children to 2800 for heavy workers. 





































RESTRICTED 




UNRRA became the sole provider for Austria after 1 April 1946. This 

vras an inportant step forward because from this point all Austrian food re- 

sburces were pooled and the ration scale made xiniform for the entire country 

under a food distribution plan prepared by the Austrian Government. However, 

since it became evident that with a maximum Austrian contribution of only about 

850 calories per day per person, the iniported supplies would not suffice to 

maintain the 1550 calorie ration scale, UNRRA requested a reduction in the normal 

ration to 1250 calories. This reduced ration was maintained through necessity 

until November 1946 when it was returned to the 1550 level, where it has re- 

« 

mained until the present. In addition to the normal ration various supplementary^ 
rations were issued to heavy workers, mothers and children. Between 1 April 1946 
and 1 Aiagust 1947 the caloric intake of the average non-self-supplier amounted to 

1660 calories, and at the.present time it is 1780 calories. 

« 

Low caloric value rations, particularly if maintained over a long 
period of time, constitute a real menace to public welfare as proven undeniably 
by health statistics. A street weighing program conducted by U.S. authorities 
in Vienna and the U.S. Zone, showed that 73^ of the population are below U.S. 
weight standards. During this period, the incidence of pulmonary tuberculosis 
increased alarmingly. Against a mean rate of 1.683 por 1000/population in the 
years 1940-44, the average in Vienna for the year 1946 rose to 2.769 and for the 
first six months of 1947 still was 1.958. Even more alarming was the increase 
in the infant mortality rate for babies under one year of age, which in Vienna 
rose from 12.59 per thousand in 1939, to a peak of 188.22 in 1945 and was at 

72.56 for the first six months in 1947# 

Insufficient and inadequate ration levels have continued for more than 


- 29 - 

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two years and have caused important repercussions in the economy of Austria. 

They have seriously affected labor efficiency, encouraged absenteeism and have 
resulted in lowered industrial production and consequent reduction of exports* 

The 1946 and 1947 harvests failed to reach the anticipated goals be¬ 
cause of the inadequacy of agricultural supplies and a disastrous drought during 
spring and summer of 1947* 

Permanent inprovement of the feeding level can be expected only through 
the gradual process of rehabilitation of Austrian figricxilture and economy in 
general, which will increase indigenous production and eventually permit Austria 
to build up export trade and to finance her own food imports ♦ 

A continued shortage of almost everything needed for full-scale agri¬ 
cultural production, such as supplies of seed, fertilizer, pesticides, equipment 
and repair parts for German-made agriciiltural machinery continues to impede 
production. 

UNRRA aid in equipment and supplies intended to rehabilitate agri¬ 
cultural production was inadequate in quantity, and lack of confidence in the 
Austrian schilling, low prices for farm produce, and absence of purchasable 
consumer goods kept many farmers from bringing their products to market. 

Livestock. The farmers made attempts to increase livestock at the 
expense of grain deliveries, but because of shortages of fodder and oilcakes 
and a prevalence of animal diseases, livestock had decreased since 1937 in 

\ 

quantity and quality, thus reducing the supply of meat, fats and dairy products. 
Animal milk production dropped from 2100 kilograms per head of cattle in 1933-37 
to an all-time low of 1200 kilograras in 1946. 

The United States Element of the iillied Commission took iimiediate steps 


f- 30 — 

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AUSTRIA 


PROGICTION OF SELECTED AGRICULTURAL AND INDUSTRIAL 
COMMODITIES IN 1946 BY ZONES OF OCCUPATION 



M cattle 

EACH UNIT EQUALS 50,000 HEADS OF CAHLE 


Population 1,670.000 


Natural resources and economic potentials of the four occupation zones 
differ greatly. None of the zones are economically self-sufficiento Some 
heavy industries, particularly steel production, are located in the western 
zones; most of the hard coal, oil, the finishing industries and agricultiirai 
production are centered in the Soviet Zone. The economic interdependence of 
the zones is therefore evident. 

The U.S. Zone is a predominantly agricultural region, but also contains 
a small portion of Austria’s brown coal and all of its salt. Of manu¬ 
facturing industries textiles and leather are of some significance. 

The U.K, Zone is the largest in area and furnishes most of Austria’s 
brown coal and important ores, such as iron, lead, zinc, molybdenum and 
magnesite. 

The Soviet Zone is in first place with respect to most of the important 
raw materials. It produces about 60% of Austria’s grain, 95? of the im¬ 
portant hard coal and all of its oil. 

The French Zone is predominantly mountainous and poor in agricultural 
production. It has no mineral resources but is rich in hydro-electric 
power. Textiles are its leading manufacturing industry. 

























































































































































RESTRICTED 

j 

to rehabilitate the badly depleted supplies of livestock. Veterinary supplies 
and equipment were imported, with assistance of UNRRA, to increase breeding 
through the establishment of artificial insemination stations. An expert U.S. 
advisor has been teaching these modern methods and the success of this important 
venture is encouraging. 

Recovery of Austrian agriculture is necessarily a slow process. It 
depends to a large extent on the fulfillment of rehabilitation needs. Much of 
the agriciiltural acreage lost since 1937 can be regained, and farming methods 
can be improved gradually through education of the younger generation. The main 
and immediate problem is the enrichment of the depleted soil by increased use of 
fertilizers, most of which have to be imported. 

Fuel and Power 

Coal, oil and water are the three main soxirces of po¥rer in a modern 
industrial economy. 

Austria is deficient in coal, but has ample supplies of oil, though at 
present, control of the production is denied her. A vast potential for hydro¬ 
electric power will allow further development of her present electric power 
supply to tne point where a valuable export surplus will be available. 

Coal . In 1937, Austria was almost self-sufficient in the production 
of brown coal. Deposits of hard coal, however, are negligible, and more than 
90^ of this industrially in^Dortant type of coal had to be imported. 

At the time of entry of Allied troops, the coal situation was dis¬ 
organized. Mines had ceased to operate and coal imports from outside areas had 
stopped. Since no cdal could be obtained from Austria's former chief suppliers, 
Poland and Czechoslovakia, the United States Element, followed by the British and 


- 31 - 

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AUSTRIA 


PRODUCTION & IMPORTS OF SOLID FUELS 

PRE-WAR & PRESENT 

MONTHLY AVERAGES IN 1000 METRIC TONS 



BROWN COAL & GLANZ COAL 



300 


200 


100 



HARD COAL & COKE 


■LEGEND 


1937 V^lst Q, 2nd Q. 3rd Q. 4th QyiJAN FEB MAR APR MAY JUNE JULY AUG SEPT 


OCT j 


IMPORTS 

(HARD COAL AND COKE) _ 

t'X’j INDIGENOUS PRODUCTION 

(HARD COAL ONLY) 


1946 


1947 


Hard Coal ; 

Hard coal >»hich has more than twice the heating value of brovm coal, 
and is used in the production of coke, steel, pig iron and gas, is by far 
the most important type of coal for the economy of the country. 

Domestic production in prevrar years covered less than IQ^ of require¬ 
ments, and is now actually in excess of prewar levels. However, the po¬ 
tential productivity of Austria's hard coal mines is small, eiia almost all 
of this basic raw material has to be imported. Production difficulties in 
the main importing regions (Ruhr, Poland, Czechoslovakia) have necessarily 
restricted ^ ^ o V.^s-^ia. with a resultant adverse effect on the 

country* s economy’-. 

Brown Coal: (Lignite) 

Austria can nomally produce encugn brown coal to cover most of its 
domestic needs. At the present tliV.e there is an extra drain on brown coal 
supplies because, while this t^pe of fuel is properly suited only for 
domestic space heating, i..6ustry is forced to use lignite in combination 
with the small supplies of hard coal now available. 
























































































































































































































RESTRICTED 


French Elements, immediately began negotiations with the Allied occupation 
authorities in Germany for the allocation and shipment of Ruhr coal to Austria. 

As a result of combined efforts by the TTfestern Allies ewd the Austrians 
local production of brown coal (Lignite) in 1946 was kept at 75^ of 1937 pro¬ 
duction, and imports of brown coal were greatly increased. Imports of hard coal 
and coke, however, were less than half of the 1937 voluma. 

The greatest sufferers from the decrease of available coal in 1946 were 
the large and mediumr-sized industry groups which on a monthly average basis re¬ 
ceived only 53^ of their 1937 cons\imption. The railroads were allocated 63$ and 
small industries and householders 68$. Irregularity of deliveries was an added 
complicating factor. Stockpiles were small and when, with the beginning of cold 
weather, deliveries began to drop, the increasing demands could not be met.. The 
crisis became so acute that in December 1946 and January 1947 Austrian industries 
with the exception of a few key plants, were forced to cease operations for a 
period of four to six weeks. In 1947 coal production imports and regularity of 
deliveries showed considerable improvement, and it is anticipated that a re¬ 
currence oX a coal crisis in the winter of 1947“4^ will be avoided. 

Oil ^ Oil was not discovered in Austria until after World War I. The 
first records in 1933 show a production of 833 tons, which was increased by 1937 
to 33,000 tons. Large scale exploitation of the fields began with the advent of 
the Nazis* During the war years, production increased to 1,000,000 tons a year, 
and at the present time still is not far below that level. 

The Austrian oilfields are entirely within the Soviet Zone and are 
under seizure by the Soviets, who allow Austria no interest or control at the 
present time. About 50$ of the oil in crude or refined form is withheld by the 


- 32 - 

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1946 

PRODUCTION & DISPOSITION OF OIL IN AUSTRIA 





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oil li an ijaportant potaoti&l aouroa of oxporta for tha Auatrlan aoonoay. At prasoct, howarar, OTar y)% of tha outfit of oruda and raflnad oil is withhold or azportad 
by tha n.S.S.R. Tha toIum ralaaaad to tha testrian (lOTammmt in 19Uo and 19lU7 Tall far short of raquiramaots. To raduoe these shortages C5 Fa authorised tha supply of aon- 
sidarabla <)iantltiaa of die sal oil nd gasollua from Army souroas to the U.S* Zona and Vienna* 









































































































RESTRICTED 


Russians and what reirains for Austrian use is insufficient for the country* s 
minimum requirements. To relieve these shortages, the United States Element 
has been aiding the U.S. Zone and U.S. area of Vienna by providing certain 
quantities of oil and oil products. 

If Austria had control of her oil resources she would have an ex¬ 
portable surplus of this raw material, which would constitute a valuable source 
of foreign exchange and hence play an in^Dortant role in Austria* s economy. 

Electric Power . One of Austria*s few advantages resulting from Nazi 
occupation is an increase in her developed hydro-electric power. However, de¬ 
velopments under the German program were undertaken to serve the interests of 
the German Reich rather than those of Austria. The great reservoir plants of 
the westernmost provinces were intended to provide power for the industrial 
sections of western Germany, and were not connected with the Austrian grid. 

Until October 1946, the "l^ol was compelled to sell its surplus power in a 

\ 

buyer*s market to the Bavarian utilities. The eastern provinces were left with¬ 
out sufficient hydro-electric power to meet the demands of their industries — 

\ 

most of them centered near Vienna. 

At the present time, hydro-electric power provides a small export 
surplus except during the winter months, when glacier-fed water supplies are 
low. At such periods thermal plants must take care of the deficiencies. The 
combination of lack of sufficient coal and of vastly increased demands by in¬ 
dustry and domestic consumsrs during the cold season have combined to make the 
power supply in the winter of 1946-47 so precarious that the slightest dis¬ 
turbance of the delicate balance between power generation and consunqjtion caused 
an immediate and conplete breakdown of the electric power supply of Vienna and 


- 33 - 

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AUSTRIA 


ELECTRIC POWER 

PRODUCTION. CONSUMPTION, IMPORTS AND EXPORTS 

AVERAGE MONTHLY RATES IN MILLION KWH 

LEGEND 







THERMAL GENERATION 



NET IMPORTS (Total Imports Less Exports) 


I.. 11 ■. 1 


HYDRO GENERATION 



NET EXPORTS (Total Exports Less Imports) 


MILLION KWH 
300 


200-::;:::: 


100 - 



1st Q. 1946 


2nd Q. 1946 


3rd Q. 1946 4th Q. 1946 JAN 


FEB MAR APR ^ MAY JUNE 

1947 


Austria has large resources of water power in its extensive western 
mountain areas. Up to 193^ exploitation vma limited, but during the 
period of German occupation construction of hydro-electric plants was 
greatly accelerated. The network established under the German program 
was calculated to serve the interests of the German Reicn rather than 
those of Austria. The new hydro-electrical plants, therefore, were linked 
with Bavaria and Italy rather than with Eastern Austria (Vienna) where 
most of Austria’s consumers liv e« 

Only a fraction of the total potential capacity has been developed 
but electric power already is a not inconsiderable export item in Austria’s 
economy. Export surpluses at the present time are available most of the 
year, excepting the winter months, yihen water supplies are at a low. 























































































RESTRICTED 


the surrounding industrial area. Further development of Austrians large 
potential in hydro-electric power is desirable, but will require large capital 
investments. 

The Power Balance . Energy from the various sources is interchangeable 
to a limited extent. Certain industries must continue the use of coal as a 
source of energy, but in others either oil or water power in the form of 
electricity can be substituted. 

The greatest potential coal saver are the Austrian railroads. In the 
provinces of Vorarlberg, Tyrol, Salzburg and parts of Upper Austria and Carinthia 
main lines are electrified, but the rest of the railroad system still depends on 
imported coal as an energy source. Austria is well aware of the great economic 
value of electrification and has a definite program providing for electrification 
of all main traffic lines of her rail system within 12 years. Such a develop¬ 
ment will substantially reduce coal in^orts. 

The return of control over her oil resources would result in further 
savings of coal and increase the degree of Austria’s self-sufficiency. 

Transportation 

The Austrian State Railways form the backbone of the Austrian trans¬ 
portation system. During the war, railroad installations were the target ob¬ 
jectives of the U.S* Air Forces, and post-war inspection testified to the 
accuracy of U.S* bombing. Artillery fire and demolition by the retreating 
German forces added to the destruction. More than one-third of the rails, many 
bridges and technical Installations, and 255? of the State railways* buildings 
were destroyed or damaged. By December 1946 nearly all of the rails and most of 
the bridges and technical Installations were again in serviceable condition, but 
shortages of construction materials delayed the repair of buildings. The present 


- 34 - 

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AUSTRIA 


POST WAR PRODUCTION OF 
SELECTED INDUSTRIAL COMMODITIES 

(1937 MONTHLY AVERAGE=100%) 



A definite recovery in industrial and mining production has taken 
place during 1946 and 1947. Present production levels of vital commodi¬ 
ties show vdde variations. No industrial index of production has been 
compiled, but in the summer of 1947 average industrial output was esti¬ 
mated to be slightly below 50^ of 1937 production. Comparisons with 1937 
levels may produce too favorable a picture, because industrialization of 
the country proceeded at an accelerated pace after occupation of the country 
by Germany in 1933, and present latent industrial capacity is considerably 
above 1937 production levels. 

Although indigenous coal production, has shown a substantial recovery, 
Austria's hard coal resources can furnish only a small fraction of her re¬ 
quirements. Lack of sufficient imports caused a shortage of this vital raw 
material. This shortage was largely responsible for the pronounced dip in 
important industries during the winter months of 1946-47. The high level 
of heavy chemical industries reflects expansion after 1937, during the time 
of Germ.an occupation. 






























































RESTRICTED 


supply of rolling stock is satisfactory because of considerable quantities of 
abandoned cars aind locomotives which were put into service• Much of this 
rolling stock, however, is subject to restitution proceedings* Inasmuch as 
Austrians entire rolling stock had been absorbed by the German Reich railways 
in 1937, it is difficult to establish Austrian ownership. The Allied Commission 
on 21 March 1947 unanimously adopted a resolution, as a teirporary remedy, 
allowing Austria 25,000 freight cars and 5,000 passenger cars which is below 
1937 levels. The question of allocation of locomotives awaits final settlement 
of reparations and restitutions. 

«» 

Net tonnage carried by the Austrian railways in 1946 was about 
of 1937, and the trend is upward. The heavy use of badly maintained rolling 

I stock is a constant threat to the smooth functioning of, the system. 

i 

Manufacturing Industries 

j' 

I General . Rehabilitation of Austrian industry is a bon^^lex and thorny 

I 

' problem. Under the Nazi regime, after 1933, Austrians industrial plant was 
greatly expanded and it is estimated that despite war damage, destruction and 

/ 

removals, industrial capacity today is at least equal to the 1937 level. However 

: German efforts in Austria were designed to complement Nazi Germany*s war economy 
without regard to Austria's needs. A realignment of industrial capacities to 
meet the requirements of a small independent Austria should be the first step in 
the rehabilitation of industry. 

The problem is coii¥>licated by a number of factors, as for instance (1) 
lack of raw materials; (2) difficulties in obtaining raw materials from foreign 
sources; (3) shortage of skilled labor; (4) improper redistribution of machine 
tools concentrated by the Nazis at centers of production; (5) shortages of 


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AUSTRIA 


CRUDE STEEL PRODUCTION 

PREWAR AND PRESENT 
Monthly Rate In Thousand Metric Tons 



2nd Q 3rd Q 4th Q 

19 4 6 


Austria* s steel production does not compare vdth that of Western 
Europe’s highly industrialized countries, such as Germany, France, Belgium, 
England and Sweden, but it is higher than that of most other middle 
European nations. 

Prewar Austria’s steel output was sufficient for its limited in¬ 
dustrial demands, but increasing industrialization since 193^ has raised 
these requirements. During the first quarter of 1946 the monthly rate of 
production reached a low of 13 % of the 193B rate, chiefly because of 
shortage of imported coal. From then on gradual improvement in pro¬ 
duction was interrupted only during January and February of 1947. Pro¬ 
duction in the summer of 1947 rose to over 60^ of the 1938 rate. 

On a per capita basis prewar Austrian steel production was about 
four times less than U.S. production, reflecting the difference in the 
degree of industrialization and mechanization between the two countries. 














































































































RESTRICTED 


building materials; (6) absence of a comprehensive plan, as a means of financing 
the reconstruction of dsimaged or destroyed plants^ ana. (7) lack of oboperation 
on the part of Soviet authorities in supporting Austrian rehabilitation plans. 

Iron and Steel , Austrians steel output has been sufficient to cover 

/ 

indigenous requirements and, in addition, to export small quantities of high- 
grade electric steel, Austria's production of this special steel amounted to 
k% of the total world steel production in 1937 and represented almost one-fourth 
of Austrian steel production in 1946. 

The rehabilitation of the Austrian iron and steel industry is in direct 
relation to coal imports. Production of pig iron came to a complete standstill 
after World War !!♦ Some steel was produced frcxa accumulated pig iron stockpiles 
but only in August 1946 was operation of blast furnaces resumed at the Donawitz 

I 

y/orks in the British Zone. With the exx^eption of the winter 1946-47> production 
has shown a steady rise. In 1947, under a three-way contract between Sweden, 
Poland and Austria, Polish coal supplies for the large steel works at Linz were 
secured in exchange for steel to be produced for Sweden. If hard coal deliveries 
can be maintained at adequate levels, steel production, which at the present 
stage of industrial rehabilitation is of basic importance for Austrian econoipy, 
will be maintained in satisfactory volume. 

Aluminum, Prewar capacity for aluminum production in Austria was 6,000 
tons per year. The country lacks alumina and depends on imports from Bavaria for 
this raw material. 

During the war, the Germans built a gigantic modern aluminum plant of 
65,000 ton capacity at Braunau, Upper Austria, on the German border, which re¬ 
mained idle after the end of the war. Early in 1946 a quadripartite agreement 


- 36 - 

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AUSTRIA 


PULP & PAPER PRODUCTS 

PRODUCTION & EXPORTS 
PREWAR &PRESENT 


MONTHLY RATES IN METRIC TONS 


20 - 


THOUSAND 


16 - 


exports 


METRIC 


12 - 



— INDIGENOUS USE 

LEGEND 


TONS 



THOUSAND 

METRIC 



NEWSPRINT & OTHER PAPER 


THOUSAND 


METRIC 


TONS 



Austrians extensive forests have always been an important source 
for exports. Over-exploitation after World War I and particularly during 
the period of Nazi occupation will restrict cutting for a number of years. 
It is planned to utilize Austrians forest resources to better advantage 
for the country* s economy by expanding exports of processed products 
rather than of timber and pulp. 



















































































































































































































































RESTRICTED 


liinited Austrian production of ailuniinuiii to 15,000 tons annually, but because of 
power shortages only 1035 tons were produced during that year* 

Paper and Woodv/orking Industries . One of Austria's most important 
sources of raw materials are her large forests which cover the mountain slopes 
in the West and extend to the hilly country on her eastern borders. It has long 
been recognized that this source of wealth can be retained only by carefully 
planned exploitation, and the extent of annual cutting, proper reforestation and 
the rigid control of pests were strictly regulated by legislation. 

Austrian industries, based on the timber resources of the coxmtry, have 
made important contributions to her foreign trade. In 1937, exports of wood and 
wood products paid for four-fifths of her food deficit. Ever since World Vfar I, 
there had been a tendency to over-exploit Austrian forest resources, but after 
193^ overcutting by the Germans began to assume alarming proportions. 

Several decades of carefvil reforestation will be needed to restore 
Austrian timber production to prewar levels. Loss in revenue from decreased 
output can be offset by increased emphasis on the export of paper and paper pro¬ 
ducts, prefabricated houses, furniture and other manufactured products. 

Since the end of the war, timber cutting has lagged because of labor 
shortages and insufficient rations for forest workers. The paper industry 
suffered constant setbacks by the diversion of pulpwood to space heating — an 
extremsly wasteful- process brought about by ladk of coal, Ibq^orts of wood and 
wood products, which had reached an approximate dollar value of $59 million in 
1937, dropped to $2,642,CXX) in 1946, and quantitatively they dropped from 
2,045,000 to 44,000 tons. The first six months of 1947 give promise of better 
prospects for the year's production. The e^gjort value of wood and wood products 

- 37 - 

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as of 1 July 1947, was $5,006,000, more than double the yearly figure for 1946* 
Further increase of exports under present conditions could be achieved only by 
withdrawing consumer goods from home markets. 

Engineering Industries , The engineering industries constitute an im¬ 
portant pillar in the country's industrial economy. In addition to supplying 
the home market with vitally needed machines, tools and metal goods, they pro¬ 
vide valuable export products. 

The rehabilitation of these industries is difficult and is greatly 
retarded by shortages of coal, power, raw materials and skilled labor and by 
lack of Soviet cooperation. 

In the western zones, there are active signs of industrial revival* 

One of the large automotive plants in the U,S, Zone returned to the production 
of trucks in July 1946, and produced 4B4 units in the remaining six months of 
that year, Ihis production level has been maintained in 1947 despite shortages 
of vital parts produced in Soviet-held factories. 

The ball bearing industries at Steyr, in the U,S, Zone, which were 
greatly expanded during the Nazi occupation, are of great importance to the 
co\mtry. Except for Germany, where manufacture is permitted on a temporary 
basis, no ball bearings are manufactured in neighboring countries. Production 
in Austria was resuned in May 1946 and by the end of the year total production 
reached 355,000 units* Output in the first six months of 1947 has steadily in¬ 
creased and the future outlook is encouraging. 

The remaining engineering industries — locomotive, machine tool, agri¬ 
cultural machinery and electric equipment — are making slight progress in their 
rehabilitation. Most of these industries are concentrated in the Soviet controlled 


- 38 - 

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, area of Vienna and have suffered from the effects of removals of equipm 5 nt by 
the Soviets, liany of the industries are operating at approximately 25^ of pre¬ 
war production, but Austrian economy often does not benefit fully from such pro¬ 
duction since the Soviet authorities control many of the plants and divert their 
production as reparations. 

Textiles , Austria has a well developed textile industry but, with the 
exception of small quantities of wool, flax and hemp, all raw materials have to 
be imported. In prewar years, foreign exchange obtained from exports of high- 
grade finished and semi-finished textile goods was sufficient to pay for most of 
the imported raw materials. 

After 1937> cotton substitutes, with wood and chemicals as a basis, 
were manufactured in a newly constructed plant in Upper Austria, thereby suId- 
stituting indigenous products for some of the raw materials that formerly had to 
be imported. However, production at this plant still is spotty because of the 
coal and power shortage and dependence on certain chemicals, especially sulphuric 
acid, produced in the Soviet-held plants in Lower Austria, 

In 1946 the Austrian textile industry had attained a level of 25 to 35? 
of its single-shift capacity. l!uch of the work was on the basis of ’^finishing'* 
contracts, under which the industry was supplied with raw material and retained 
a certain percentage of it in payment for the processing. 

Austria’s textile industry has suffered relatively small damage during 
the war. The major obstacle to speedy rehabilitation are sufficient credits to 
purchase raw material abroad. 

Leather , The leather industry, likewise, has always been dependent on 
imports of raw materials, hides and tanning material. Its exports were of the 

- 39 - 

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luxury goods type. At the present time the industry is operating at no more 
than 20^ of capacity, 

Chemical Industries , Prior to 1938, Austrian chemical industries were 
of minor importance. During the Nazi period a vast expansion took place, par¬ 
ticularly in the manufacture of semi-finished materials for final processing in 
Germany. Many of these newly built plants were stripped by the Soviets for 
reparations, but those located in the Western Zones remained intact. The pro- 

N, 

duction facilities for one of the most vital heavy chemicals, sulphuric acid, 
are entirely under Soviet control and 1946 production figures are unavailable. 

Production of hydro-chloric acid, caustic soda and soda ash, ^lich 
are produced only in the U.S. Zone, increased considerably during 1946 and in 
the second quarter of 1947. 

The production curve of industrial gases is of particular interest be¬ 
cause it reflects the close relationship between recent industrial development 
and the coal supply. Production shows a slow but steady rise from January 1946 
\mtil November 1946, followed by a sudden drop and decline until March 1947, re¬ 
flecting the serious state of industry during the winter power and coal crisis, 

# 

During the second quarter of 1947, production again shows a sharp increase. 

Significant changes have taken place in the production of fertilizer. 
Before the war Austria produced nitrogenous and phosphoric fertilizers, with 
potassium fertilizer the only one of' the three basic fertilizer groups which had 
to be entirely imported. Now the huge nitrogen plant at Linz not only can pro¬ 
vide all of Austria’s requirements for nitrogenous fertilizer but is able to 
produce great quantities of this much-needed product for export. Production of 
phosphatic fertilizers, concentrated in the Soviet Zone, however, has ceased 
because of destruction or removal of plant equipment, 

- 40 - 

lESTIUtTED 




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AUSTRIA 


RANGING VOLUME AND COMPOSITION OF IMPORTS AND EXPORTS 

PREWAR AND PRESENT 


IMPORTS 



TOTAL IMPORTS 790 MILLION SCHILLINGS 


1947 


EXPORTS 



TOTAL EXPORTS 470 MILLION SCHILLINGS 


FINISHED GOODS 5% 



TOTAL IMPORTS 563 MILLION SCHILLINGS 


1946 



TOTAL EXPORTS 320 MILLION SCHILLINGS 



1 j '■'1- —oic wiB most unporDant, components 

aL postwar imports, though in absolute figurekthey 

of i ^ items. Imports 

time are limited by lack of 

exports to pay for them. ^ 


of heroil the recent development of Austria's water power and 

of her oil fields have created two new potential export items. 

JVood and wood products used to be one of prewar Austria's principal 
exports, but over-«ploitation during the years of German occupation,^will 
restrict cuttii^ of timber during the next few years. In 1947 the per¬ 
centage distribution in a.U groups is similar to prewar, but total Lports 
are only at about one-third their prewar level. exports 





































































































































































































RESTRICTED 


Optical glass and a type of glass used for artificial jewelry are 
produced in the French Zone. Production was resumed late in 1945 and has been 
maintained at a fairly high level. Artificial jewelry glass is exported in 
quantity to the U.S. and therefore has particular significance in providing 
dollar credits badly needed for the rehabilitation of Austria’s economy. 

Foreign Trade and Balance of Payments 

The disintegration of the Austro-Hungarian Enquire after V/orld War I 
left Austria a relatively small country, with an economy geared to the require¬ 
ments of the old EnqDire rather than to those of the truncated nevf Austrian State. 

Foreign trade was badly unbalanced. During the years of transition 
foreign loans played an in 5 )ortant role in Austria’s economy, but gradually the 
country succeeded in achieving a workable economy. In 1937 the foreign mer¬ 
chandise trade deficit was entirely covered by invisible exports, such as tourist 
trade, revenues from freight and handling charges on goods in transit, insurance, 
etc., which amounted to approximately 2^% of total merchandise exports. 

Austria must export if she is to survive and maintain her staindards of 
living. Industries catering to the export market are of vital importance to 
provide for imports of the country’s basic fuels and raw materials. 

From primitive barter deals in 1945 > generally carried out on a zonal 
basis, the rehabilitation of Austria’s export-import trade progressed to the 
more orderly form of trade agreements. The end of 1946 saw official trade re¬ 
lations established with Czechoslovakia, Italy, Poland, Switzerland, Great 
Britain, France, the Belgium-Luxembourg Economic Union, Holland and Hungary. 

The present trend is characterized by a definite shift of Austria’s trade from 
her prewar eastern trade to the west* New markets have to be found for many 
Axistrian exports idiich were sold formerly to Eastern European coxmtries. 

- 41 - 

RESTRICTED 




\ 


\ 


RESTRICTED 


An itemized quantitative comparison between Austria*s foreign trade 
in 1937 and pi*esent trade is impossible because of inaccurate official records 
during the immediate postwar period and inability of the Austrian government to 
maintain any degree of control over exports of raw materials and finished or 
processed materials by the Soviet authorities. 

Although certain monetary figures have been compiled by the Military 
Government authorities in Vienna, they are not fully indicative of actual con¬ 
ditions and therefore are not published here. 

Both exports and imports included only commercial trade transactions. 
Relief imports by UNRRA, by the occupying powers and by charitable organizations, 
as well as such coal imports through OMIUS, for which no definite arrangements 
for payment were concluded, are not shown under imports. Exports do not include 
shipments out of the country from Soviet controlled industries, the value of 
which is at best an Austrian estimate, with no assurance as to the amount which 
eventually may be credited to Austria. 

It can be said, however, that in terms of 1937 schillings imports in 
1947 are only about one-h^f and exports not much more than one-third of cor¬ 
responding 1937 figures. The foreign trade deficit is very large and invisible 
exports which traditionally are an inq^ortant factor in Austria’s balance of pay¬ 
ment, are only a small fraction of prewar. Assistance to Austria under ERP 
shoxild be in the direction of rehabilitation of her economy rather than mere 
relief* A revitalized industry will eventually enable Austria to increase pro¬ 
duction to the point where sufficient export surpluses will be available to pro¬ 
vide for her vital iii 5 )orts. 

Tourist trade is a major invisible export item and has always accounted 

- 42 - 

RESTRICTED 



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for a major portion of Austria’s national income. Tourist trade facilities 
have suffered both from the war and the occupation that followed. Many hotels 
¥fere bomb—damaged or destroyed^ others were requisitioned by the occupying 
forces] the equipment has suffered by many y8oU*s of wear and tear and cannot be 
replaced* Nevertheless, in 1947 with the assistance of the Western Allies, 
tourist trade was inaugurated on a modest scale. By 1 July, Austrian authorities 
had reserved 26 hotels in the three western zones for use by tourists against 
payment in hard currencies. Only minor results are anticipated this year, but 
the first step in the revival of the important tourist trade has been taken. 

Finance 

Rehabilitation of the Austrian economy depends to a great extent on 
the stability of the country’s currency. One of the first steps taken by the 
Allies and the Austrian government after the end of World VTar II was to extricate 
Austria’s ciirrency from its con^^lete submergence in the German monetary system, 
and to reestablish the faith of the people in the restored Austrian schilling 
currency. 

At first, control over financial institutions in the U*S. Zone was 

\ 

exercised through the established branches of the former Reichsbank, but the 
U.S. authorities immediately took active steps towards the establishment of 
coiiQ)lete control by the reconstituted Austrian National Bank. 

The Ikiited States Element gave every aid to private insurance com¬ 
panies in recovering missing records which had been removed to Germany. With 
the assistance of other Allied Powers a balance wasi established between the pay¬ 
ment of claims and the rebuilding of minimum premium reserves. An important 
problem for Austria’s financial dustitutions is the final disposition of holdings 

I 

- 1*3 - 

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of Reich Government obligations and of genuine Austrian assets under the 
.existing interpretations of the Potsdam Agreement with respect to German 
External Assets. 

Currency and Price Control . Most important was the currency problem. 
The United States Element took active steps to reestablish an independent 
Austrian currency. Conversion of Reichsmark to Austrian schillings took place 
in December 1945 i when Reichsmarks were exchanged into schillings on a one for 
one basis. At the same time, however, bank deposits were frozen and limited 
withdrawals were permitted only on a month to month basis in order to achieve a 
drastic cut in the amount of money in circulation. 

This measure was necessary to remove the grave threat to the stability 
of the Austrian currency, resulting from the large increase in currency and bank 
deposits which had taken place during the Anschluss period, and'from additional 
inflationary pressure by the financing of the large occupation costs. 

As a result of these measures, black market schilling quotations for 
the dollar dropped more than 9056 between December 1945 and August 1946, and 
monetary circulation was reduced by about 50J6. 

However, the effects of large Soviet demands for occupation costs 
again gradually raised the circulation. This new rise in currency circulation 
necessairily exerted pressTire on the legal wage-price structure of the country. 
Until April 1946 prices in general were held at. the level established by the 
Nazis, althoTigh an upward movement was recognized as inevitable. The rise in 
production costs, because of the disruption of normal supply channels and other 
postwar conditions, called for higher prices. The acceptance of the exchange 
rate of 10 schillings for one U.S. dollar was in effect a mild inflationary 


- 44 - 

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move, and the attempt by some manufacturers to charge off repair costs for war 
damages and reconstruction to the consumer silso tended to increase the danger 
of inflation. 

Since early 1946 upward movement of legal prices has been kept under 
control, but in view of the great scarcity of goods, currency circulation still 
remained too large to prevent very high prices on extra legal markets. Legis¬ 
lation enacted by the Austrian Parliament in November 1947 provided for. re- 
placemens of the 1945 schilling by a new currency designed to have a higher 
value in teriiLs of commodities. It is expected that this second currency reform 
will further advance the work begun with the Conversion Bill of December 1945* 
Reduction of Occupation Costs . Reduction of occupation costs from a 
level entirely out of proportion with Austria* s normal budget was imperative to 
safeguard the favorable results achieved by the currency control measures insti¬ 
tuted in 1945. 

Occupation expenditures early in 1946 were 200^ of the Austrian 

civilian budget with the major portion payable to the Soviet authorities. A 

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quadripartite agreement reached in May 1946 provided for drastic reductions. 
Accordingly, allocations for occupation expenditures for the period 1 April to 
30 June 1946 were reduced to 35^ of the civilian budget and in the third and 

/ 

fourth quarters of 1946 they were further lowered to 30^ and 2 ^% respectively. 

In 1947 total allocations for occupation costs were reduced to 15^ 
of the civilian budget for the first and second quarters and to 13.7^ for the 
third quarter. 

The United States Element went still further in accordance with its 
policy to aid economic rehabilitation of Austria. In June 1947 the U.S. 


- 45 - 

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renounced any further demands on the Austrian Government for occupation costs 
and agreed to provide U.3. dollars to purchase the necessary schilling occu¬ 
pation funds or to reimburse the Austrian Liinistry of Finance in dollars for 
schilling expenditures made by the Ministry on its behalf* As a result of this 
action, occupation expenditures by the Austrian Government for the July-September 

period 1947 dropped to slightly over 10^ of the Austrian civilian budget* In 

♦ 

addition, the Austrian Government obtained much needed free dollar exchange. 

At the same time it was agreed to turn over to the Austrian Government 
a total of 3 OB 114.111 on schillings held by the U.S. Forces in Austria. In re¬ 
turn, the' Austrian Government assumed responsibility for all claims outstanding 
against the U.S* Forces in Austria as of 30 June 1947* 




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